Job reports move markets because they’re the strongest signal economists have about the strength of the U.S. economy. But worker productivity is just as important to economic growth; it’s just harder to measure or capture.
As we take a final look at 2024 hiring data, the outlook for 2025 can benefit from examining the inputs necessary to maximize future economic gains. I’m talking specifically about the state of workforce development.
Looking back: Job creation
Last week delivered two different snapshots of the labor market. The ADP National Employment Report for December showed a slowdown in private job creation, with employers adding 122,000 jobs. The non-farm payrolls report from the Bureau of Labor Statistics showed that the economy added 256,000 jobs. Of those, 223,000, or nearly 90 percent, came from private-sector hiring.
These series are built on different data. ADP counts the number of employees active on payrolls during a reference week that includes the twelfth day of work in each month. The BLS report is based on a survey that asks employers how many paychecks they sent during the same reference week.
The ADP and BLS estimates aren’t likely to line up every month, but over the long term they typically show the same trend. Both data sets suggest that private-sector job gains were solid in 2024 but slower than they had been the previous year.
Looking ahead: Skills development
At ADP Research, we measure not only the strength of the private-sector job market, but the strength and resiliency of its workforce.
Remember, long-term growth requires both new jobs and advances in worker productivity. One without the other leads to economic sluggishness, with too many people unemployed or too little output.
A vital component of productivity is expertise. But our research shows that too few workers are getting the training they need on the job.
Analyzing the payrolls of 51 million private-sector employees between 2019 and 2023, we found that less than 4 percent of workers were upskilled in their first two years of employment.
In the new Future of Jobs Report from the World Economic Forum, ADP researchers demonstrated upskilling’s value by examining payroll data through the lens of Occupation Information Network (O*NET) job zones, which map the level of preparation necessary to fulfill certain occupations.
Our conclusion: The wage gains from upskilling are enormous. Salaries leapt by 37 percent on average when a person was upskilled from one job zone to the next.
Obtaining a college degree or vocational training is one way workers can climb the skills ladder to capture higher pay. But in a rapidly changing global labor market roiled by demographic shifts and rapid-fire technological advances, on-the job training might be even more effective.
Yet nearly 75 percent of workers leave an employer without ever getting promoted, according to ADP payroll data. This suggests that employers are missing an opportunity to invest in worker productivity.
My take
Monthly job reports give us a snapshot of hiring. But the labor market is not just about jobs, it’s about people. By measuring skills acquisition over time, we can estimate the future trajectory of worker productivity.
This year, ADP Research will augment its established job and pay data with research into skills development and how workers and on-the-job-training are evolving in response to advances in artificial intelligence and other technologies.
To kick things off, this week we begin the rollout of People at Work 2025, our annual report on global worker sentiment.
People at Work is built on survey data collected from a stratified, random sample of nearly 38,000 working adults across 34 economies on six continents between July 23 and Aug. 6, 2024. The findings provide regional and market-to-market comparisons of worker sentiment in the Asia-Pacific region, Europe, Latin America, the Middle East/Africa, and North America
The report’s first finding reveals that workers feel unprepared for the future. Globally, only 24 percent were confident they have the skills needed to advance to the next job level in the next three years. Just 17 percent strongly agreed that their employers are investing in the skills they need for career advancement.
These findings are of importance to employers. When organizations invest in upskilling, their workers are much less likely to quit. And people are much more likely to describe themselves as highly productive when on-the-job training is provided.
In today’s dynamic workplace, the companies that thrive will be the ones that think long term and invest in their greatest asset: their people.
With analysis by Ben Hanowell, Mary Hayes, PhD, and Jared Northrop
The week ahead
Monday: ADP Research releases the first findings from our revamped People at Work 2025 series, which provides a global view of the issues affecting workers and businesses.
Tuesday: In this data-heavy week, economists will be weighing every release for its potential to affect inflation. The BLS Producer Pricer Index and the Federal Reserve Beige Book give the first look at input prices and U.S. business activity.
Wednesday: Prepare for the Consumer Price Index to grab attention. Given the uncertainty of last week’s dueling job reports, the CPI could either reverse Friday’s market selloff or justify it.
Thursday: At the end of the day, the economy is about the consumer. The Census Bureau’s retail sales report might restore market optimism if consumer spending was as broad-based and resilient in December as it was during the rest of 2024.
Friday: There are five new housing starts on my street alone. I don’t know if this signifies a building boom, but it bodes well. Strong Census Bureau data on housing starts and building permits could mean that residential construction will lift to the economy and provide a much-needed inventory boost.
